As we start this series of posts on the classic (and sometimes controversial) topic of Passive Income, it's worth taking a bit of time to agree on what we're talking about when we use the phrase.

It seems there's a massive misunderstanding around whether passive income is to be aspired to or or something to be suspicious of. It's an innocent enough phrase but why does it evoke such strong opinions both for and against?

What's the reality behind passive income? As with most things in life, taking the time to understand something is usually well worth the effort.

I suspect there are two key reasons for this lack of understanding:

There is no simple definition of what passive actually is and how it can be attained, and therefore a lot of confusion around the whole subject.

The phrase has, like several others, been used and associated with "get rich quick" schemes. The idea put out to the unwary is that passive income is a way of getting money for nothing and often for no financial commitment, which is highly appealing but ultimately doomed.

To try to address both of these reasons let's get down to some proper definitions.

The most succinct definition of passive income I have found, from trading website ADVFN is: "Income (such as investment income) that does not come from active participation in a business."

Often the best place to look for definition of income types ought to be from the tax man. In the UK passive income isn't a category for tax purposes, but you can get a feel here for what HMRC considers passive income.

But according to the US tax service there are three types of income:

Active income

Passive income

Portfolio income

Active income is when you trade time for money. A regular Job.

Dictionaries can't quite decide in some case the difference between passive and portfolio income.

According to Investopedia, US passive income is "Earnings an individual derives from a rental property, limited partnership or other enterprise in which he or she is not materially involved."

And portfolio income is "income from investments, dividends, interest, royalties and capital gains. Portfolio income does not come from passive investments and is not earned through normal business activity. Typically, income from interest on money that has been loaned does not count as portfolio income." - Investopedia, again.

(It's somehow reassuring to know that the simple phrase passive income seems equally misunderstood on both sides of the Atlantic!).

Nevertheless, all agree that the difference between active and passive (or portfolio) income is whether one is materially involved in generating the income.

Some income is more passive than others.

In reality there is seldom black-and-white active or passive income - most income is somewhere on a scale between the two...

What about property income ?

Since we're on a property blog, this is an excellent question. If you're a landlord and working directly in your business are you getting passive income? I would say not quite - its somewhere on the scale : semi-passive. If you've delegated out all the work to managing agents, what then? Still not 100% passive but getting closer.

If you've invested in a fully-managed purpose-built student property ?

Or invested in property bonds or crowdfunding?

Again these sit on the scale of semi-passive, especially when you include the due diligence and research needed before making the investment. It's hands-on, "do-once" work, but work it certainly is.

And in the end

In conclusion, I would suggest that a stronger investment goal than the Holy Grail of pure passive income is to create income streams through investments that are leveraged by other peoples time (lettings agents, good brokers, investment researchers) and perhaps also other peoples' money (for example secured loans and mortgages).

I'll leave you with an example of semi-passive property income: Purpose-built student property is a proven "done-for-you" model. Once you've carried out your due diligence and own the student suite, there is literally nothing to do for years - except receive your net rental income (which compares very favourably with labour-intensive buy-to-let).

Don't take my word for it - see for yourself some passive income in action...

Our Westminster Seminar 'War Room' Survival Strategies for Property Investors on the "hot topic" of how changes to UK property tax may seriously affect the future of most landlord investors, really hit the spot...

Some property investors know of the potential massive hit to profitability coming their way starting as soon as April 2017 and a few of these have already taken steps to minimise the impact.

At the same time, though, the majority of property investors in the UK are not even be aware that unchecked, these sweeping changes could potentially wipe out their buy-to-let business.

Being informed is half the battle won. That's why I and two other property and tax experts recently brought together property investors to Westminster from all around London and beyond to "tell it like it is" - and to offer some intelligent, practical solutions.

The response from the audience showed that we'd really hit the spot. So for all those that couldn't be there on the night or missed out on tickets... I like to share our ideas with you in three ways ...

To request a copy of the presentation, gain access to key video clips from the seminar, and speak to me about your property investment plans, just click below you can access my diary and book a property investment review at a time of your choosing. I want to give you real value and as this is so important I'm waiving my consultancy fee - there's no cost to you whatsoever.

There are "malevolent" forces of taxation conspiring to destroy your career as a Buy-to-Let Property Investor.

This Hallowe'en is one day of the year when we have fun and can "pile on" the fear about the future, but frankly there's rather a lot to be afraid of financially - if you're like most landlord investors in the UK today.

Now, if property tax puts you under a spell, things are set to get far more ghoulish from next year, as the changes to UK landlords' taxation begin their gruesome grip on our finances.

There's no Silver Bullet - but knowing your options is the key.

Help is at hand...

That's why we're meeting with a group of determined buy-to-let owners in Westminster next week on Thursday 10th November.

It's war, and it's time to prepare our defences.

If you're around London next week, join us for an evening in Westminster as three property and tax experts join forces to give you survival strategies to manage and grow your property interests.

Due to high demand seats are now very limited, but to find out more and reserve your place, click the button below:

The tax onslaught against residential landlords has become the hot topic among property investors. And it's only just begun.

Some landlords know of the potential massive hit to profitability coming their way starting next April and a few of these have already taken steps to minimise the impact, However others are not even be aware that unchecked, these sweeping changes could potentially wipe out their buy-to-let businesses...

It's war, and it's time to prepare our defences.

So - why not join us for an evening in Westminster as three property and tax experts join forces to give you survival strategies to manage and grow your property interests?

To find out more and reserve your place, you can click the button below:

Here's some more detail...

This seminar is for you if are:

worried about the changes to tax law and how it might damage your property wealth

looking for ways to minimise the impact of the new UK property taxes on your portfolio

seeking to grow your portfolio in the most tax-efficient manner

looking for inspiration or new ideas

What you'll get out of attending this event:

Returns: Find out how to get better returns on your money and investments

Convenient location: Westminster venue, central London - you will get the details with your joining instructions

When: Thursday 10th November 2016 after work 18.30 - 20.45

Time-saving: Concentrated expertise - meet 3 experts and see what they have to say, in the same room at the same time.

Places are first come first served already filling fast so reserve your seat today.

Continuing our property Road Trip to the North, we discovered a gem in Liverpool and had ourselves something of a "road to Damascus" experience. In a city where historical architecture is second only in the UK to London, our eyes were opened to the great opportunity for refurbishing beautiful city centre buildings for residential use. No finer example of this exists today than The Produce Exchange.

Property Investment in Liverpool city centre...

The northern UK city of Liverpool has historically had its ups and downs socially and financially, and now is very much on the UP.

Property investment here is a real focus now, as substantial EU development grants and direct foreign investment have aided the renaissance of this great city.

The ball really started rolling when Liverpool was voted European Capital of Culture back in 2008, but was immediately stalled by the international credit crunch.

But over the last two years or so, the money is back.

One has only to tour the city centre to see the plethora of property new-build, serving both the student and the residential markets. The docks now boast chic and sophisticated dining and cultural experiences, including Tate Liverpool and the Museum of Liverpool by the waterfront close to the famous and iconic Liver Buildings (pictured).

Buying uniqueness - why The Produce Exchange?

But how rare it is to find a property investment opportunity like The Produce Exchange residential property development in the heart of the city and close to all the cultural and musical landmarks you could wish for. This historic former commercial building is being lovingly restored and converted to high-spec residential apartments. Beautiful architectural features are everywhere, allowing us to offer this unique opportunity to property investors with an eye for a great deal.

The Produce Exchange is set in one of Liverpool's most desirable places to live, work and invest. Is it passive investment through property? Certainly - the property will be operated for you by reputable asset managers (should you choose to appoint them), and for extra security the developer offers a guaranteed 7% net yield in the first year of operation. Mortgage finance is available subject to status. As a hassle-free and lucrative property investment, it takes a lot of beating.

Summary

Traditional Liverpool property is still we believe undervalued, but finding a bargain in property of this calibre is rare indeed. That's why we're excited to offer apartments at The Produce Exchange from as little as just £86,000 for a luxury studio and NET yields anticipated to exceed 7%. Ask me for the rental figures from our research and let's talk.

This is a small but beautiful development and will not remain on the market for long.

What to do next?

Discover more about this excellent property investment opportunity. Download our introductory brochure today. Just click the link below and we"ll take care of the rest.

Whereas many property brokers just pass on marketing material from property developers, we like to literally go the extra mile.

Seeing is believing - and our student development, Northgate Point in Chester was well worth the visit last week. We did this to satisfy ourselves that our investors should take a closer look. We are convinced they should. Find out why...

The view on the ground can be very different so we make a point of visiting sites to check progress, location and demand, and meet the key players in the development and running.

We do this to ensure our investors get the best possible deals available. Northgate Point in Chester is a superbly located purpose built student hall under construction, and here's why we think it has a very great deal to offer our investors...

Graham's on-site introduction:

Location and demand is crucial for a successful student development. As Chester is a beautiful historic city, availabilty of good locations near the city centre and the university are rare indeed. Northgate Point is literally a 2 minute walk from university buildings and just 5 minutes from the cultural city centre. Demand from students for Northgate Point is going to be very strong indeed when it opens for the 2016 academic year.

The developer has an excellent reputation for spotting great student locations, and the first of its two student halls in Leicester, which opened last year have full occupancy, and it is expected that rents will be rising this coming academic year. Great news for our investors there!

If anything, Northgate Point is an even better proposition, and I have no hesitation in recommending to any UK property investor looking for excellent rental yields consider this opportunity now whilst some availability still remains.

And as this is commercial property, George Osborne's 3% second home Stamp Duty Surcharge does not apply here!

Discover much more about this remarkable income-generating powerhouse of a property investment. Download our guide today - just click the image below.

If you have any questions or would like to discuss more about this opportunity and my recent visit, get in touch and I'll be delighted to have a chat (07942 818 606)

This Wednesday the UK Chancellor announced yet another body-blow for the small landlord in Britain, by hiking Stamp Duty (SDLT) on investment property and second homes with a 3% surcharge on all property purchases over £40,000 from next April.

In today's world landlords are regrettably an easy target politically, being as they are, blamed for everything from social injustice to being responsible for property prices growing out of the reach of first time buyers.

Surprise! This targetting from what has traditionally been the property owners' political party, began by surprise in this years Budget when it was announced that buy-to-let mortgages would no longer be treated as a standard business expense. The realisation dawned slowly that for the first time ever, landlords could soon be receiving income tax bills greater than their profit. Something no other business suffers from.

The likely result is that rents will rise disproportionately to income as a result of the mortgage tax, and that property prices will surge as we see the rush to beat next April's SDLT increase. This harms both tenants and would-be first time buyers - the very groups that the government is seemingly trying to help.

All this is bound to cause further anti-landlord sentiment (who will be blamed on both counts), and who knows what further politically expedient anti-landlord moves will be next from the government?

Is this the death of the amateur landlord? We foresee that many landlords will be disposing of some or all of their investment properties when reality starts to bite in two years time and this new legislation starts to really take hold. This will be at just about the time when interest rates rises are likely to become a real issue for cashflow and survival. Many landlords that do survive all this will be discouraged from buying further residential investment property as purchase costs multiply with the stamp duty hike.

So the rules of amateur property investment are changing. Smart investors will see the signs and adapt in time. Others frankly will "die". It's certainly going to make potential investors think twice about buy-to-let. Fortunately there are always other practical ways to invest in property, which will come to the fore as restidential property is no longer seen as the only or obvious option.

As a dedicated fan of what we call Passive Income Through Property, one of the main questions I'm faced with from property investors is the issue of control over one's property.

This is particularly true when speaking with UK landlords who understandably like to run their own show. What do I mean by this?

For example often when I speak to a buy-to-let (BTL) investor about say Hotel Room Investments, the questions that arise immediately run like this:

1. It's too good to be true. How can you (ie the developer) promise something like a 10% net yield when the average buy to let Gross yield s closer to 6%? And that's excluding management charges, insurance, agents fee, purchase costs, wear and tear, void periods, etc etc.

2. Even if that's possible now, says the landlord, how can I guarantee the developer or hotelier can keep this up? I'm relying on the hotelier's business model and the hotels performance. With my own property, I'm in control of all this!

3. What about my exit strategy? If I want to get out of a buy-to-let I just sell it, and usually for a decent profit.

4. Its far too risky. I know what I like and I like what I know. Haven't there been some massive train wrecks with these types of property investment, especially overseas?

These are all very reasonable concerns of course, and on the face of it the landlord has some very valid points: After all It's pretty easy to source and buy a UK residential property pretty much anywhere that isn't going to be a complete disaster: even a bad decision made now will probably come right in the long term by virtue of capital growth, providing you can stick with it. On the other hand its very easy to buy a bad passive investment without expert guidance. Seems a no-brainer.

What underlies a lot of this thinking is a sense of control through ownership.

But property ownership can easliy give us just the illusion of control. Buying an investment property is one thing, living with it is quite another.

The BTL control idea is borne out of this kind of thinking:

Principle 1: I can plan my borrowing. Fixed rate mortgages mean predicable borrowing costs. Reality: Swap rates and base rates are utterly outside of our control. There is a Bank of England base rate increase coming. Not today but it will come.

Principal 2: I can adapt or improve my property to increase rental income and property value. Reality: whilst a Good Thing to do, there is a high capital cost to this and both the rental market and resale market depend mostly on macro-economic factors such as employment levels and GDP, all outside of our control.

Principal 3: The Private Rental Sector is too important to UK PLC for the government to jeapodise it. Reality: the recent Summer budget attacked landlords tax situation aggressively, on three counts, arguably for pure political gain. The chancellor was able to do this as the majority of the population (non-landlords) seem to regard landlords as greedy, and the government will gain more support than they lose.

Principal 4: If things get too bad I can always sell up. Reality: if things are bad for you they're probably bad for everyone, so selling may simply not be an option, just when you need to.

These are just examples, there are many more. In fact just add to this list another column for every supplier to a BTL business, such as block service charges, government regulatory controls, stamp duty, insurance.

The good news is that once property investment is recognised as a whole string of uncontrollables, these can be anticipated to some degree. The risk is still there but stress-testing your property portfolio is essential to survival in the rough and tumble world of BTL.

Passive property investment means seemly relinquishing all of this perceived control, but what are you really sacrificing? The sacrifice is perhaps going to be doing far more work up front when deciding what to invest in. The rewards of getting it right is hassle free property income.

Let me be clear, this is not about the right or the wrong way to invest in property. Buy to let investment can be incredibly lucrative over the longer term and any mistakes made at the buying stage will most likely be rectified in time. Just be mindful that whatever we buy, we do not pull many of the strings at all.

In conclusion, I believe that proper research is the absolute key to dealing with risk and understanding the control issues in any property investment, whether it's a holiday home in the sun, a room in a Scottish Castle or a tasty rental flat in Harrow.

Warren Buffett says to invest only in what you can understand. He doesnt mean this as an invitation to laziness since his own example is to move into new areas, having first put in the time and money to research these new ventures thoroughly - and to understand them.

Established wisdom is that diversification of assets is an important investment tool. A carefully chosen balanced portfolio allows you to spread the risk to your portfolio without necessarily reducing the returns. The same number and value of eggs, but in different baskets.

How does all this relate to property?

Understanding just one form of property investment would I believe be a disservice to your future. But here's the rub: it's comfortable to stick with doing what you know; you become an expert with a deep knowledge of your chosen specialist property subject.

UK Buy-to-let investors often concentrate on one aspect as THE way of securing their future income. I'm speaking from personal experience when I say that it is easy to be bitten by the bug of building a buy-to-let portfolio, and just going with what you know.

Buy-to-let alone can feel safe enough to put all the eggs in that basket, but it can be risky as like most investments there are many factors outside of the owners control, for example:

Lenders' and Bank of England interest rate rises

Property market collapse and distressed sale of your property

Legislation changes in favour of tenants

Lenders changing their tune when times are hard

Rogue / destructive tenants

These are all real examples that have happened and have hurt. Many of these can affect your entire Buy-to-let portfolio and, if you've sunk everything you have (and can borrow) into it, your future well-being.

Having come through the worse UK property crash in decades, many experienced landlords that survived it realise how close they came to a meltdown and are looking to diversify. They're not looking to the traditional financial institutions as there is still a deep mistrust of them. These investors know how powerful property investment is so are looking at other ways to invest in more property, but not just more of the same.

What other ways to profit from property?

Fortunately (and partly as a response to the world banking crisis), there are several new and interesting ways to invest in property alongside buy-to-let including:

Few of these offer any gearing - 100% of the investment is in cash. Many landlords found themselves stretched by too much borrowing in the credit-fuelled boom of the early "naughties", so this is often seen as a way of reducing the overall portfolio gearing and exposure to interest rate rises and mortgage lenders' well ... shenanigans.

The other key benefit is that each of these property investments types offer pretty pure Passive Income (something that Buy To Let promises but seldom delivers). Just like picking stocks, you do your research upfront and when satisfied, you invest. Nothing more to do during the lifetime of the investment. And unlike stocks and shares there are no ongoing broker charges that frequently reduce your net returns to the tiny interest rates many have come to accept in the UK.

In essence, don't be seduced by those who would tell you that Buy To Let is the single key to property prosperity. The stakes of sinking everything into it are high and the hassle factor stays with you as long as you own those properties.

Diversification in property can mitigate these risks now and build you stream of true passive income to enjoy in your dotage in years to come when owning flats and houses is no longer as much fun as it used to be.

With so many flavours of property investment available today, we teach our clients to plan their own mix to match the life they want to lead both now and in the decades ahead: property for income, for growth and indeed for enjoyment.

Mr. Buffett puts it very well: "Someone is sitting in the shade today because someone planted a tree a long time ago."

I'll leave you with one example of alternative property investment: fractional ownership. Find out how it works with our essential guide. Just click on the image below to get your copy.

This week sees one of the principal property investor exhibitions come to London - the Property Investor and Homebuyer Show at the Excel Exhibition Centre.

Will you be joining the 1000's of property investors attending over Friday and Saturday?

HighGround Property is joining the party and will be exhibiting, meeting customers and providing free training, and we'd love to see you there.

Come as visit me and the team at Stand 16 for a friendly chat about how to get started or take the next steps building your property portfolio both in the UK and internationally. We're also running a superb competition prize that could see you on a beach in Cape Verde.

On Saturday at 2:45pm I will be presenting a seminar in Hall 6 titled "Passive Income Through Property - Ridiculous or Real?" where I'll be discussing the merits of fully-managed (hands-free) property investment compared to traditional buy-to-let investment. Just scroll down to Saturday and you'll find us there.

HighGround is heavily involved with the work of our governing body the Association of Intenational Property Professionals I have also been invited to join a panel of experts for a panel debate on Saturday afternoon at 1pm entitled "Where in the World to Invest?". Join us for that too if you simply can't get enough of me!

Finally if you'd like to arrange a private meeting with me about your plans and goals for property investment over the next 12 months, you can do this here:

If you can't make the show you can still book a call with me. Just drop a note in the extra information box and we'll take care of the rest.